Eurozone economy expands 0.5% in the first quarter

Economic growth in the countries that share the euro rose by 0.5% in the first quarter of 2017, according to gross domestic product data from eurostat.

This robust start to the year matched the rate of growth seen in the final quarter of 2016, and beat the 0.4% growth seen across the wider European Union.

Robust recovery

The data matched the forecasts of analysts, many of whom now believe a strong recovery is possible in spite of the threats posed by Britain's exit from the EU.

"While investors were concerned about a breakup in the monetary union at the end of last year, it now looks like the eurozone economy is more robust than many thought," said Bert Coljin, senior eurozone economist at ING.

Labour markets improve

Improvements in the region's labour markets have been an important factor in the recovery, and this was reflected in the April eurozone purchasing managers' index for manufacturing, published on the previous day.

On its final reading, the manufacturing index hit 56.7, slightly below the flash estimate of 56.8, but still a six-year high and up from the previous month’s 56.2. A reading above 50 indicates expanding activity.

Continued improvements in the labour market are an important factor as solid job growth boosts domestic demand.

by Bert Coljin, ING

More six-year highs

France, Germany and Italy – the eurozone's three largest economies - were all at or near six-year highs, thanks to output, new orders and employment levels all rising at their quickest rates in six years.

Mr Coljin added: "While consumers had plenty to worry about in the first quarter, confidence remained strong. The continued improvements in the labour market are an important factor here, as solid job growth boosts domestic demand."

In the UK, which is currently negotiating terms on which it leaves the EU, construction PMI for April hit 53.1, up from 52.2 in March. The day before, UK manufacturing PMI neared a three-year high.

Market reactions

In the markets, however, the response was muted as European stock indexes fell in response to weaker than expected results from Apple.Inc overnight in the US. The euro was 0.2 per cent weaker against the dollar at $1.0910, but 0.1 per cent stronger versus the pound at €1.1833.

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